AAdvantage Lawsuit Settled

As many of you know, we’ve followed the Wolens v. American Airlines case for many years. Well, the case has finally been settled. And, at the risk of insulting the efforts of those who steered the case along all these years, we’re disappointed to say that it all boiled down to egos and money – both of which ended up belonging to the attorneys.

One of the lead attorneys in the case, Michael B. Hyman, of Much Shelist Freed Denenberg Ament and Rubenstein, put out a press release following the settlement of the case stating that, “These hard-fought, far-reaching lawsuits show that airline passengers can fight back, and that consumers have a collective commanding voice when diligent and dedicated counsel lead the charge.” We suspect that he was referring to himself and the fact that he convinced the court that $25,000,000 (that’s not a typo, that is 25 MILLION dollars!) in attorney’s fees was fair and reasonable. We are not experts in this matter, but the manner in which this was announced leaves us a little disappointed. More on that later.

First, let’s review the case and what it means. Essentially this was a settlement of two cases – Wolens v. American Airlines and Gutterman v. American Airlines – although the names aren’t that important, since they are both class-action suits. The Wolens case involved changes AAdvantage made to their program back in 1988 when they introduced PlanAAhead and AAnytime awards. The argument was that a grandfather clause should be instituted for those miles that were earned prior to the changes, and that members with these grandfathered miles in their accounts should have the old award schedule, without capacity controls, made available to them for the redemption of said miles. The same general argument was made in the Gutterman case in 1995 when AAdvantage changed their award schedule from 20,000 to 25,000 miles for a PlanAAhead award.

Now, some 12,000 billable hours and 13 years of litigation later – including time spent both in the Illinois and U.S. Supreme courts, we finally arrive at a settlement. If you’re one of the participants in this suit and are reading this and wondering how to collect your part of the settlement, all we can tell you is sorry, you’re too late. In fact, of the nearly 4 million AAdvantage members who were eligible for claims in this case, only 37.5% of them returned their claim forms. Hello? I wrote several articles and warnings to members to get their forms in, and still only about 1/3 of the members cared enough to file their claims? Remember this statistic the next time you hear that members are so passionate about these these programs.

If every participant in the suit had filed a claim, American Airlines would have paid damages in the range of $305.9 million to $445 million. Now this value will be discounted to reflect actual claims filed, effectively reducing the figures to approximately $114.7 million to $141.6 million. So, even though the settlement numbers look big on paper, the actual damage to American Airlines is quite minimal due to the low number of participants who filed a claim. Add to that the fact that nearly 20% of the awards that are handed out by American Airlines are expected to go unredeemed, and the “real” settlement figures are reduced even further, to about $95.6 million to $113.3 million.

But please, don’t short your American Airlines stock thinking that this is going to hurt them financially. These are funny money numbers and have absolutely no impact on the real world of frequent flyer programs. For instance, depending on the class you are entered in, you will receive either a 5,000-mile certificate (which can be used with 35,000 old miles to claim a single domestic coach award without capacity controls) or a 30,000-mile certificate (allowing you to claim two capacity control free tickets for 50,000 miles, instead of 80,000 miles). Others will have a choice of the same 5,000-mile discount against a capacity free award or $25 off a fare of $249.99 or less, $50 off a fare of $250 to $499.99, and $75 off a fare of $500 or more. Those eligible for the Gutterman settlement have similar offers of cash or miles but the numbers vary.

Now, which of you wise guys and gals will purposely use your claim certificate to claim an award at 40,000 miles (only costing you 35,000 miles with the certificate you will receive) when chances are you have never had to claim a capacity control free award ever? Most of us have had great luck with the 25,000-mile award and would be foolish to spend the additional 10,000 miles just to take advantage of the certificate. And, do you think those discounts will be honored at Orbitz, Expedia or Travelocity? Sorry Charlie.

Though we are not impressed with the settlement details, we are pleased with the message that was sent – do not mess with our rights as frequent flyers. Unfortunately, in the final settlement papers, more pages were devoted to justifying the lawyers fees than were spent explaining the settlement terms. Of course, when you charge $25,000,000 for 12,000 billable hours of work (that’s over $2,000 per hour), you’re going to have some explaining to do. Makes those cigarette cases look like a deal.

And what of the frequent flyers that started all this? The Court did approve an incentive award of 50,000 AAdvantage program “new” miles each to Myron Wolens, Albert Gale, R. Craig Zafis, Bret Maxwell, Arthur Gutterman, Steven Gutterman, Sharon Keld, Donald Karchmer, Jack Rosenblum, and William Oshinski. And, without appeal, the settlement will become final on August 2. This means that George W. Bush won’t be the only person you can expect a rebate check from in the next few months.

As for Michael B. Hyman – he must be one hell of a lawyer. Just ask him.

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